It was a hectic month for Aphria Inc. In this September 20, 2018, a worker from the Aphria enterprises in Leamington looks after photos from the archive of marijuana plants in the process of reproduction.
News of the potential deal to absorb the pot giant Aphria Inc. caused a big surge in the market on Friday, but the leaders of the pot giant from Leamington are skeptical that the Ohio-based Green Growth Brands, a marijuana company, would be a good thing for its company. shareholders.
“While we appreciate GGB’s interest in the value we created in Aphria and our significant growth prospects, their proposal does not reward our shareholders for participating in such a deal,” said Irwin Simon, who was appointed new chairman of Aphria’s board of directors. after Green Growth Brands announced their offer on Thursday afternoon.
Simon, an entrepreneur with experience in the packaged food industry, replaces Vic Neufeld as chairman of the board of directors. Neufeld remains CEO of Aphria.
A Canadian marijuana producer, through its new chairman, said Friday that the company's shareholders must reject an attempt at a hostile takeover.
“The proposed proposal is quite risky, given the conditions of GGB for completing brokerage financing at a price that is more than double the recent average price of their shares as a key condition for the offer,” said Simon.
However, in the next couple of weeks, Green Growth Brands said they intend to make an official offer for Aphria, estimating the marijuana producer at 2.8 billion Canadian dollars.
The Ohio-based company said that Aphria shareholders would receive 1.5714 Green Growth shares for each of their shares. This corresponds to a premium of 45.5% of the Aphria closing price of $ 6.19 on the Toronto Stock Exchange on December 24th.
Aphria shareholders will receive $ 11 per share, well above Thursday's closing price of $ 7.57.
Shares of the company jumped to $ 8.65 per share at the opening of the market on Friday morning, as a result, the trading day ended at $ 8.52, and the company's value amounted to $ 1.88 billion. Despite this increase, the value of Aphria shares is less than double less than they were on October 17, the day when recreational marijuana became legal in Canada.
The GGB takeover transaction is still subject to a number of conditions if it is ever resolved by the shareholders of both companies.
“The Board has determined that the GGB proposal in its current form significantly underestimates the company,” said Irwin. “Aphria has tremendous market opportunities as a leader in this sector and a strategic vision for realizing these opportunities. Our goal is to realize this value for the benefit of all our shareholders. ”
Neufeld remains a member of the board of directors in Africa. He did not respond on Friday to messages left by a star.
Neufeld, the CEO of Aphria, is also one of five members of Green Acre Capital’s “advisory board”, a private equity investment company that invests in cannabis manufacturing, research and trading companies, including significant investments in Green Growth Brands.
Further entanglement of potential supply: Aphria also said on Friday that it "holds passive investments" in Green Acre Capital Fund II, "which, as we understand, has invested in numerous new cannabis companies, including GGB."
Green Growth Brands CEO Peter Horvath said that a hostile takeover bid arose after official attempts to seize Aphria were rejected.
Takeovers made directly to shareholders – without the approval of the board of directors of the target company – are considered hostile. It is expected that the shareholders of each company will soon receive information about the proposal if it becomes official.
“We announced our intention to bid a couple of weeks before the actual offer, because during this time we think that the value of our company will be fully known,” said Horvath in a television interview with BNN Bloomberg.
“We have many years of experience in this work (corporate retail and management) in various formats. Cannabis is another category that can occur. We think that (Aphria) has amazing growing opportunities, and it's time to fulfill their supply agreements. ”
Another major investor in Green Growth Brands is the Shottenstein family, which has a history of owning a fashionable retail business, including American Eagle, Victoria's Secret and others.
For many years, Horvath held the position of senior manager at these companies and believes that the combination of management skills of both companies may be useful in the cannabis industry.
“We respect their team and assets in Canada,” said Horvath. “We think their team is strong, and combining with our team makes sense.
“We believe that this is a great opportunity and we will give our shareholders the opportunity to respond. The decision will be made by the shareholders, and that is how it will act. ”
In recent weeks, Aphria’s stock price has fallen after reporting criticism of some acquisitions. Quintessential Capital Management and Hindenburg Research short sellers earlier this month questioned the company's value based on recent acquisitions in Colombia, Jamaica and Argentina.
Horvath said that, regardless of any information regarding these transactions, Green Growth Brands makes its offer strictly because of the activities of Aphria in Canada.
On Friday, Aphria announced that it had established an independent committee of directors to consider any formal proposals that it receives.
Earlier this month, Aphria announced that it had appointed a “special committee” to verify the company's recent acquisition of its Latin American holdings.